Hits: 7

News

  • Crypto FCA is to ban the sale of crypto- derivatives to retail consumers. May have some impact on Plus 500.
  • Advice MP’s say the quality of financial advice needs to improve. I wonder if advisers would say the same about MP’s.

Mattioli Woods – Trading Update  

Share Price 792p

Mkt Cap £212m

Conflict Disclosure: No Holding

  • News Strong EBITDA and PBT growth is anticipated for the year to May 2019. That looks in line with forecasts.  Murray Smith is leaving the board but staying with the group while a new Risk and Compliance Officer is appointed alongside a new Group Finance Director.
  • Estimates.Forecasts anticipate £60m revenue, £12.7m PBT and 39.6p EPS with a dividend of  18.9p for the tear to May 2019. That is modest revenue growth but 27% PBT growth following investment into the business.
  • Valuation PER is 17.9X and yield 2.6%. ROE is 11.2%.
  • Conclusion The company is well placed.  Unusually this company has the ability to reinvest its earnings in acquisitions over time. Which is the reason it would be nice to see the ROE going up over time. That would be the trigger to make these shares expensive. In the meantime they continue to look fairly valued as they have done for the last 12 months.

Quilter Plc – Strategic Review

Share Price 145p

Mkt Cap £2.76bn

Conflict Disclosure: No Holding

  • News  Quilter confirms the stories that a strategic review is taking place regarding the Heritage life assurance business. No decision has been taken
  • Valuation On a SOTP basis I can get to £3.6bn but this is just having a stab. Methodology as follows:
  • Advice and Wealth Management  – £373m revenue. Financial planning – £1bn AUM and £89m revenue – worth 3X revenue so valued at £267m. Quilter Cheviot – £22.4bn AUM yielding 72bps revenue – definitely worth 3% AUM – £672m. Quilter Investors – advisory so lower quality but £17.8bn yielding 59bps so must be worth 2% – £356m.
  • Platforms (£414m revenue). Wealth solutions – £170m revenue.  Integrafin trades at 32X PE and Nucleus at 28X.  If we imputed a 40% margin we get £68m and putting that on 30X after tax profit gives us ££1.6bn.  International –  £18.4bn AUA and £135m revenue.  This is probably worth a lower multiple as its margins will be lower.  If The UK platform is worth 9X revenue let’s say 5X revenue which is £675m. May be a bit harsh here.  
  • So value of business before the life business may be£3.57bn but there are £32m of head office costs. If we put them on a post tax multiple of 15 that would reduce the valuation by £600m so £3bn. The life business has net assets of c£1bn. And revenue of £109m.  That could be worth NAV but may be hopeful. Lets say £600m.  So all in SOTP £3.6bn.
  • At the current price the PER is 13X. If they stayed as they are the £3.6bn valuation would put the PER at 16.5X.
  • Conclusion.The company included the life assurance earnings within the Wealth Platforms division and the market has declined to value the company highly.  This may be a step towards releasing value but I can’t help wondering if the £32m central overhead is a large number that may tempt a competitor to step in and take a look at the whole group.

jeremy@charltonillingworth.co.uk